Under pressure as private enforcement mounts

In part two of a two-part summary of CDR’s Competition Litigation Symposium held in London on 22 Fe...

In part two of a two-part summary of CDR’s Competition Litigation Symposium held in London on 22 February, panels traversed the progress of the EU Damages Directive, use of experts, Brexit, private enforcement trends and abuse of dominance.

Earlier on in the day, keynote speaker Peter Scott of Norton Rose Fulbright had outlined how the removal of joint and several liability from the European Union Damages Directive (Directive on Antitrust Damages Actions) would incentivise whistleblowers. Next a panel comprising DG Competition’s Emanuela Canetta, Paul Hitchings of Cuatrecasas, Christopher Rother and Laurent Geelhand, both of Hausfeld, and chaired by Stefaan Raes of Liedekerke Wolters Waelbroeck Kirkpatrick, delved further into Directive’s impact so far on private enforcement actions.

Canetta began with an update on the progress of the Directive, of which the deadline for implementation was December 2016. Just seven EU member states had transposed it into their respective legal systems on time, those member states which had not made the deadline received automatic infringement notices from the European Commission; to date, only Greece and Portugal (at the time of writing) were still to implement the directive, although both countries are advancing the Directive through their respective parliaments.

With bringing actions for damages now made simpler via the Directive, the panel was asked to consider “where should actions be brought, and where would defendants want claims to be brought?”

Hitchings gave an overview of Spain, which has seen for the first time, follow-on claims brought as a direct result of a Commission decision – namely from the Trucks Cartel finding. There had been a major upturn in damages actions in Spain since the implementation of the Directive, he said, while conflicting legal environments in Europe led to differences in time, cost, funding, judicial expertise, expert evidence, discovery and predictability.

Keeping to discussion on trucks, Rother pointed to a recent EUR 350,000 judgment in Hanover, Germany, against trucks cartelist MAN, which had awarded damages to the city of Gottingen in principle. While the court found there was liability, because the claim was being brought by a municipality, which used the trucks to provide a public service, pass-on was not applicable.

Then on to France, where Hausfeld recently opened a new Paris office, and where Geelhand discussed decisions of the French Competition Authority (Autorité de la concurrence), outlining the approach to expert evidence in French cases.

A stellar line-up of experts and lawyers, chaired by Kenny Henderson of Stewarts, formed the next panel which explored the role of experts and how best they can work with their instructing counsel.

Kicking off, RBB Economics’ Francesco Rosati explained the value of economists as experts, where when looking at establishing damages, damage is the difference between the amount that has been paid and the amount that should have been paid, so it was important to assess the nature of the conduct in its economic context. “One has to establish a presumption of the facts before establishing the reality,” he added.

Like accountants, economists are also adept at dealing with data, he continued. “Coming up with a number is one thing but is that number robust? Are the predictions sound and consistent with reality?” Additionally, judges were also well-placed to deal with the robustness of economic data.

Turning to the United States, Shearman & Sterling’s Todd Stenerson pointed to antitrust developments, including those at the US Department of Justice which has recently indicated a potential shift in the antitrust damages landscape with talk of a change in the country’s law on indirect purchaser pass-on, which currently is not provided for.

Looking at the regime in the United Kingdom, Henderson asked: “If and when the Competition Appeal Tribunal (CAT) certifies a collective proceeding order, will it lead to the same hydraulic pressure to settle as in the US?”

While as Rosati had said, judges can handle economic evidence, James Harvey of Economic Insight said there was sometimes a reluctance for them to do so.

With this in mind, he asked: “Can we do better in the process of how we demonstrate our value, and in how experts explain what they do?”

The question of how much to do and when to do it, seemed to emerge constantly, he added. “As changes in the legal framework take place there is an opportunity for the economist’s role to be redefined.”

While an obvious statement, earlier discussions make the process better, Harvey explained. “Are the right people doing the right thing? A lot of people are good at numbers, but economists and accountants are different.”

Going back to the US approach, which is very well-versed in the use of experts, Stenerson said: “In US law, once liability has been established, there is a thumb on the scale for damages,” adding that there were policy issues tied up in the MasterCard consumer action, which had been heavily debated by panels earlier in the day.

PERSUASIVE INFLUENCE

In a flying, but robust, visit to Brexit, Hugh Mercer QC of Essex Court Chambers, who is chair of the Bar Council’s Brexit working group, Sir Nicholas Forwood QC of White & Case and Brick Court Chambers, Liz Walker, group general counsel of BT and 20 Essex Street’s Sara Masters QC looked at the likely status of UK competition law once Britain’s withdrawal from the EU is complete.

Jurisdiction, said Mercer, is up in the air. “There are voices in academia saying that we should go back to common law, that it will work well. As a practitioner I don’t agree with that.” He favoured more the Rome I and Rome II approach.

Giving her views on arbitration for competition cases, Masters outlined the benefits with enforcement, given the availability of widespread enforceability under the 1958 New York Convention, which works well. There are often very experienced judges for parties to choose from and among those who are appointed as tribunal presidents.

Not much certainty had been provided for practitioners since the 2016 referendum, so what would happen to the substantive competition laws in the UK and how was Brexit impacting choice of jurisdiction clauses in contracts?

For Walker, the law was not the main concern, the main concern was the state of the business. Brexit was seemingly a UK issue, which has not been given as much attention elsewhere in the world.

After Brexit, Commission decisions were likely to be more persuasive as they were binding. Although it is unlikely that any wholesale changes to substantive law would be made, said Mercer, with Forwood adding that there could be changes to substantive law in terms of block exemptions via a refined approach to vertical agreements, but all would happen in the longer term.

FIGHTING TALK

Giving a keynote address prior to taking his place on the enforcement panel, Competition and Markets Authority (CMA) legal director Tom Smith began with the regulator’s recent activity, which over the last 12 months had included expansion with a new office in Scotland and additional budget being granted to its enforcement division.

For the CMA, it was also a year of firsts; the regulator issued its first director disqualification and its first fines for failure to respond to requests for information – the latter against Pfizer, as well as Hungry House in its proposed merger with Just Eat.

Now for the numbers. During 2016 and 2017, the CMA imposed fines of over GBP 150 million, and in 2017 it concluded 10 cases, five within nine months of the investigation commencing. There were six infringement decisions concerning market sharing arrangements, an online sales ban, resale price maintenance, price-fixing, bid-rigging and information exchange.

With 15 open antitrust cases on it books, eight of which focus on the pharmaceutical sector, Smith said pharma was the CMA’s major current focus, and would be for some time.

The CMA “looks forward to continuing as a leading actor in global competition law enforcement, post-Brexit, where we are the decision-makers in the largest and most complex cases”, he concluded.

Smith then joined a panel chaired by Hausfeld’s Rother (as before), with Ireland’s Richard Ryan of Arthur Cox and Queen Mary University of London’s Professor Eyad Maher Dabbah, to discuss current enforcement trends.

Beginning with a recent Irish Supreme Court ruling, which had leapfrogged to the highest court from fist instance, Ryan outlined a case where the court had ruled against the Irish Competition and Consumer Protection Commission (CCPC), which had in a dawn raid seized entire data sources containing information that was not related to the company it was investigating.

This case, he said, could have wider application to privacy issues arising out of dawn raids elsewhere, which led into Dabbah outlining inconsistent approaches to enforcement across the world.

Here cooperation was important, Dabbah asserted, but what would the UK’s cooperation model resemble post-Brexit? For cooperation, you need three things: trust, clarity on the role of businesses and input from international bodies or networks.

The big issue for the CMA after Brexit would be data sharing, particularly in light of the new General Data Protection Regulation (GDPR) which comes into effect in May.

This was being considered carefully, said Smith, who said that bilateral agreements were just one option available to the CMA, but they “do not solve all problems”.

Giving his expert view, Davies stressed the enormous difficultly faced by companies trying to figure out how to comply with abuse of dominance guidance.

One issue is that while the Commission has no obligation to do a full investigation into such cases, it can issue its finding based entirely on fact. This breeds uncertainty around the test it uses.

Goeteyn cast a legal view on Inteland its implications, particularly on the ‘as efficient competitor test’, highlighting how the decision raises the burden of proof but also that context in a fast-paced, innovative environment.

Bagci then picked up the mantle explaining the importance and complexity of conducting market tests, discussing various economic cost standards and concepts.

For Brown, the two recent cases of Google v Streetmap and Socrates v Law Society demonstrated the importance of identifying the counter-factual in private follow-on enforcement claims over excessive pricing.

Another common thread, he added, was the use of hot-tubbing of expert evidence in both of those cases.

Commenting on the use of benchmarks in big pharma cases on excessive pricing, having been instructed on such cases before the CAT, Kreisberger made reference to Pfizer and Flynn v CMA, before outlining the definition in paroxetine in the CAT, where she had appeared for Merck.

Looking ahead, Geelhand predicted private damages actions following the Commission’s January 2018 decision which found Qualcomm had prevented competition by making payments to a key customer to stop it shopping elsewhere for LTE baseband chipsets. Qulacomm was fined EUR 997 million, which it is appealing.

The Commission’s investigation into Facebook in Germany could also yield follow-on claims, as could its investigation into Gazprom over its conduct in gas markets in Central and Eastern Europe.

CDR would like to thank all of the day’s speakers and sponsors. Part one of this summary can be found here.

Full panel reports will be published in the Summer issue of CDR magazine and will subsequently appear online.

Our next event is the Spring Arbitration Symposium taking place in London on 26 April, 2018. For more information click here.

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